Favourite book: Doesn’t have one. Likes history books and is now reading “El Carapachay” by Sarmiento

by fermín koop

herald staff

The heat wave that struck much of the country in December and early January seems to have subsided but isolated blackouts continue. When the Herald went to interview former Energy secretary Jorge Lapeña at his home in the upscale neighbourhood around Plaza San Martín, his building was suffering a partial blackout and taking the stairs was the only option to get to his apartment. After knocking at the door because the doorbell wasn’t working due to the blackout, Lapeña received the Herald in his living room to discuss the hundreds of thousands of people who were left in darkness over the Christmas holiday. A week earlier, Lapeña and seven other former Energy secretaries who have been critical of President Cristina Fernández de Kirchner’s administration for years released a report that called for a hike in electricity rates even as they recognized that distributors have not fulfilled their public service contracts.

The federal government claims to have carried out the necessary investments in the energy sector, but you disagree…

The energy sector has lost more than a decade if we consider the drop in gas and oil production. Taking into account that 85 percent of our energy is based on hydrocarbons we are now in a predicament. Argentina has become an energy importing country and the government avoids all responsibility for this.

Based on that situation, has a plan been implemented to boost renewable energies?

Renewable energies such as solar, hydroelectric and wind fulfill only a small part of the country’s electricity grid and it´s decreasing yearly. We can see that on hydroelectric energy, which used to account for 60 percent of the electricity and has now dropped to 40 percent. Wind energy is minimal and has not expanded as much as in other Latin American countries.

Still, the government is moving forward with building two ambitious dams in Santa Cruz—isn´t that an important project?

Argentina has lost the ability to develop good projects and this is an example of that. It’s an expensive project and the government has not found the way to pay for it yet. It’s also still not clear how the energy is going to be transported from Patagonia to the rest of the country—it’s destined to fail.

One of the key demands of the former secretaries is that electricity rates must increase and subsidies must be eliminated, but wouldn’t that lead to a decrease in demand and affect the poorest in society?

Electricity rates must increase and have to be at a certain level that covers the entire cost of distribution. If this doesn’t happen, companies won’t be able to invest and the energy deficit will continue to increase. The price increase has to be rational and gradual but since a significant portion of society wouldn’t be able to pay the full price, subsidies would have to continue.

The government has blamed power distributors for failing to invest. Is that the case?

It the government says they have not invested, it must be true. If they had done the necessary works the energy demand would have been met. Still, the government is also responsible for not allowing a price hike so the companies have enough funds to invest.

What guarantees do we have that the companies would do the promised investments if they were to receive more funds?

There are none. The only guarantee is if the government forced the companies to fulfill their contracts but that’s not going to happen. Companies didn’t tell the people what was going on in the energy sector because they were afraid to do so.

YPF was able to reverse years of steady declines in oil and gas production in 2013. Does that mean that the expropriation of a majority stake in the company was a good decision?

Not necessarily. Oil and gas production continues to drop in the country. The fact that YPF drops less that the average doesn’t change the current outlook. It’s a sign that YPF has invested more in drilling but has not found any new reservoirs.

But isn’t the increase in production a sign that Repsol wasn’t carrying out the necessary investments?

No, it’s not. It’s a sign that YPF is investing a lot in drilling. If the company drills a lot in the same reservoir there can be a growth in production but that’s only short-term. Regardless, of course it’s good news that YPF is boosting production. I am happy about it.

The government presents the Vaca Muerta shale formation as the solution to the current energy woes. Do you agree with that assesment?

Vaca Muerta is the only thing the government talks about and it should establish other objectives as well, such as exploring some of the remaining conventional resources. By making Vaca Muerta the sole objective, the government follows the same path that Repsol did.

Can Argentina once again become an energy-exporting country thanks to Vaca Muerta?

In order for that to happen, the project needs to start. If Vaca Muerta were developed with the same shale performance as the United States, Argentina could once again become an exporter. But the chances of that are small.

Could reaching an agreement with Repsol lead to more foreign investment in Vaca Muerta?

Argentina needs to reach an agreement with Repsol for moral, political and technical reasons. An expropriation implies a payment so the government must pay Repsol. By doing that, we demonstrate we are a country that fulfills its commitments and accepts the rules of capitalism. That would clear the way for investors to come to Argentina. We don’t have the sufficient resources to develop Vaca Muerta by ourselves.

Back in 1989, you wrote a report that claimed the problems in the energy sector were serious but not structural. Why have you changed your mind?

In the report I was talking about the blackouts during Alfonsín’s government, which were not due to structural reasons. The energy system back then was solid. The government wasn’t able to meet the demand due to unpredictable problems and after we solved them the energy system returned to normal. It was hard to predict what happened but I admit the system was not perfect; there were some problems on the thermal system. The scheduled blackouts would have been shorter if those problems had been solved.

Government officials have often said you didn’t carry out the necessary investments during your time in office…

They are trying to find something in the past that’s similar to the current problems but we carried out all the necessary investments. I was in charge of an energy system that reached self-sufficiency and I started, along with Alfonsín, key projects such as Yacyretá and Piedra del Águila.

Most of the former Energy secretaries currently work as advisers for energy companies. Shouldn’t you reveal that connection rather than simply identifying yourself as a former Energy secretary without business interests?

The only thing that we have to make clear is our ethical behaviour. I don’t have any moral inconsistencies with the work I have carried out as an adviser. I’ve worked for numerous companies before becoming a government official and after that I became an energy adviser. I currently don’t advise any energy companies and I had only supervised state companies and not private ones when I was at the government, some of which don’t even exist now.